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The Canadian air transport industry: In crisis or in transition?

Université du Québec a‘ Montréal (UQAM) School of Business Administration, archambault.michel{at}uqam.ca

Jacques Roy

HEC-Montréal (École Caisse de détudes Commerciales de Montréal — University of Montreal)

The air transport industry is currently experiencing one of the most difficult periods in its history. According to the International Air Transport Association (IATA), the global airline industry lost more than US$10bn in 2001. In Europe, well-established carriers such as Sabena and Swissair have had to declare bankruptcy after decades of existence. In Canada, the dominant carrier, Air Canada, declared a record loss of C$1.25bn in 2001.

It is tempting to attribute all these problems to the economic slowdown that began in early 2001 and was exacerbated by the tragic events of 11th September, 2001. After all, global air traffic dropped approximately 4 per cent in 2001. However, low-fare carriers are still earning profits and growing at a rate that is the envy of traditional scheduled carriers. In short, one question arises: are the industry’s current problems the result of a temporary economic downturn, or are they the outcome of a major transformation that began several years ago? This is the question addressed in this paper by examining recent changes in the Canadian air transport industry.

Key Words: airlines • tourism • low-fare carriers • airports • competition • Canada

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